Widespread concerns about “conservative” and “inconsistent” property valuations have led a number of lenders to introduce a single set of standing instructions for valuers.
The new standing instructions, developed by RP Data, make it simpler for valuers who no longer have to deal with different standing instructions from different banks.
The standing instructions outline a bank’s expectations regarding PropertyPRO (shortform), Restricted Valuation (Drive by) and Progress Inspection reports.
The Commonwealth Bank took the lead to gain agreement with other lenders, lenders' mortgage insurance (LMI) providers, the Australian Property Institute and major valuation firms, to establish this industry benchmark.
Previously, most banks had their own set of residential valuation standing instructions, which caused valuer confusion, unnecessary amended valuations and delays.
The new standing instructions provide guidelines that will assist in reducing the amount of amended reports and delays.
They also allow retail banks to measure valuation quality against the valuation minimum standards.
The new standardised set of instructions couldn’t come at a better time, with many brokers complaining about the “inconsistencies” in valuations from valuer to valuer and lender to lender.
This week Smart Property Investment discussed valuation issues with six leading property experts.
"[Valuers are] the centre of the universe," said Property Investment Professionals of Australia's Ben Kingsley.
"They control the whole equation, they either make it or break it. The bit that gets me is the comment on the bottom of some of the valuations, they might be doing a valuation on a property in Flemington and I get commentary around ‘the global economic outlook is looking uncertain’."
"There’s every reason why, I mean they carry all the risk, 100 per cent of the risk, make no mistake about it. But I’d rather get an argument around why this property is valued at what it is as opposed to some throw away line that it’s the global economic outlook that’s making me value this property 10 per cent lower than what I would have valued it six months ago."
Right Property Group's co-founder, Steve Waters, agreed. "I’m sure everyone has had the same experience where you can have the valuer go in on a Monday and there can be a 30 per cent difference on the Tuesday in terms of the same property.
"Until that’s addressed in terms of the security of their own position, because that’s why they’re valuing lower I believe, it’s nothing to do with the data, the whole industry is up for it. It’s going to be a long slow task."